Daniel D. Dykstra, Partner

In response to a $140 million judgment Hulk Hogan, known legally as Terrence Bollea, obtained against, inter alia, Gawker Media, LLC (“Gawker”) and its founder and erstwhile CEO Nicholas G.A. Denton in connection with Mr. Bollea’s allegations that Gawker damaged him by publicizing a video depicting Mr. Bollea and the wife of his friend engaged in sexual intercourse, Mr. Denton filed a chapter 11 bankruptcy case seeking to discharge his personal obligations arising from the judgment and other debts. See In re Nicholas G.A. Denton, Case No. 16-12239 (Bankr. S.D.N.Y.).

Bankruptcy courts are special courts. They are neither Article III courts (Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50 (1982)) nor their adjuncts (Stern v. Marshall, 564 U.S. 462 (2011)), but nonetheless have inherent powers (Law v. Siegel, 134 S. Ct. 1188, 1194, 571 U.S. __ (2014)) and—pursuant to 11 U.S.C. § 105—certain equitable powers. This means that they have broad powers to order equitable remedies—such as specific performance—where no adequate remedy at law exists, to the extent not inconsistent with any other provisions of the Bankruptcy Code. See Law v. Siegel, 134 S. Ct. at 1194, 571 U.S. at __. This is the backdrop against which inequitable conduct by a creditor may lead to subordination of its claim in a bankruptcy proceeding under established, codified, equitable principles. Subordination means that a claim, by judicial decree, is lowered, in whole or part, in priority relative to its ordinary position in respect of one or more other claims.

This article discusses Minnesota law relating to the removal (“discharge”) of judgments following a judgment debtor’s bankruptcy.